State pension warning as ‘growing concerns’ triple lock will be ‘simply unaffordable’ | Personal Finance | Finance
State pension payments are the bedrock of retirement income for many people, and so getting the most out of them is likely to be key. However, a new report has sparked concerns amongst experts about the future of the state pension in its current form.
The Government Actuary report relates to National Insurance contributions made by Britons.
It showed recent changes to NI contributions and the state pension mean outgoings will exceed receipts in each year from 2024/25 till 2027/28.
This is likely to spark a debate on the sustainability of the state pension in its current form.
Steven Cameron, pensions director at Aegon, said: “The state pensions being paid today are funded from the National Insurance contributions of today’s workers on a ‘pay as you go’ basis.
READ MORE: State pension triple lock to offer ‘little light’ amid high inflation
“Last year, the Government significantly increased the earnings threshold above which National Insurance contributions are paid.
“This was good news for take-home pay, but it meant the Government will receive less from National Insurance receipts than it would have, both this year and in future.
“On the other hand, under the ‘triple lock’, the state pension will be increased by a record 10.1 percent in April which will cost the Government significantly more, again both next year and in future years.”
The report from the Government Actuary has shown expenditure as being higher than receipts until the 2027/28 year.
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It is worth noting the figures do not look beyond this point.
However, Mr Cameron warned unless changes are made to the system the state pension is becoming “increasingly unaffordable”.
He continued: “While there is a very small fund to cover the shortfalls till 2028, it is declining rapidly and could run out entirely unless the Treasury steps in and pays special grants.
“The Government did honour the state pension triple lock this year.
“But there is growing concern that granting such generous upratings in future years will simply be unaffordable, without putting growing pressures on today’s already stretched workers.”
READ MORE: State pension triple lock increase means ‘better year’ for older Brits
In his Autumn Statement, the Chancellor Jeremy Hunt touched upon the triple lock increase, explaining why it would be making a return in April 2023.
He said: “The cost of living crisis is harming not just poor pensioners but all pensioners.
“So because we have taken difficult decisions elsewhere in this statement, I can announce that we will fulfil our pledge to the country to protect the pensions triple lock.”
Mr Hunt explained the 10.1 percent increase in line with September’s CPI inflation figure means the average state pension will increase by £870 – the biggest ever cash rise for the state pension.
A pending decision is also due on the state pension age, as the review continues, with Mr Hunt stating feedback can be expected in “early 2023”.
According to Mr Cameron this is likely to have a large part to play in the affordability of the state pension going forward.
He added: “The Government will shortly publish findings of its review into state pension age.
“There’s a strong likelihood that on affordability grounds, this will have to increase beyond age 67, earlier than currently planned. These latest Government Actuary figures make changes to state pensions even more likely.”
A Government spokesperson recently told Express.co.uk a decision was yet to be made on the state pension age.
The DWP spokesperson added: ““The Government is required by law to regularly review the state pension age and the second state pension age review is currently considering, based on a wide range of evidence including latest life expectancy data and two independent reports, whether the rules around state pension age remain appropriate.
“The review will be published in early 2023.”
